Promote
The share of profits a sponsor earns above their invested capital, after investors get their preferred return. Rewards the sponsor for making the deal work.
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Part 1 of 4
Why a seller cares
The promote is the sponsor's share of profits after investors get their preferred return. It is how a syndicate's manager is paid for making a deal work, and it is why they push for a low purchase price on your building.
Part 2 of 4
A simple example
A syndicate buys your building, pays investors an 8% pref, and splits everything above it 70/30. The 30% is the sponsor's promote.
| The dollar of profit | Where it goes |
|---|---|
| The first, up to the 8% pref | The investors |
| The next, above the pref | 70% to investors, 30% to the sponsor |
| If there is no profit | Nobody gets a promote |
The promote pays the sponsor for the upside, and the upside starts with buying well.
Part 3 of 4
What people get wrong
That the sponsor is paid a salary. Their real pay is the promote, which only exists if the deal makes money.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines promote in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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